Debt Ratios for Residential Lending

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you've paid your other monthly loans.

How to figure your qualifying ratio

Most underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that makes up the full payment.

The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt together. Recurring debt includes payments on credit cards, auto loans, child support, etcetera.

Examples:

With a 28/36 qualifying ratio

• Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
• Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
• Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, we offer a Loan Qualifying Calculator.

Guidelines Only

Don't forget these are only guidelines. We'd be thrilled to go over pre-qualification to help you figure out how large a mortgage loan you can afford.

At BeneGroup, Inc., we answer questions about qualifying all the time. Give us a call at 4083956018.